Disputed contractual dues do not constitute cheating absent dishonest intent at inception.

M/s. Frontline Corporation Ltd. engaged Opposite Party No. 2, a sole proprietor, to perform civil works for a petrol-pump project. After periodic payments and a dispute over bills, the parties agreed on a settlement of ₹7,87,000, which the company paid in instalments.

Opposite Party No. 2 later claimed a further ₹39,30,525 and filed a private complaint alleging offences under Sections 384, 406 and 420 IPC against four individuals, including the petitioners, who were directors of the company. The company itself was not named as an accused.

On the day the complaint was filed, the Magistrate examined the complainant and issued process against the petitioners under Sections 406 and 420 IPC, although they resided outside the Magistrate’s territorial jurisdiction and no inquiry or investigation under Section 202 CrPC had been conducted. The petitioners sought quashing under Section 482 CrPC.

Whether non-payment or disputed deductions under a commercial works contract, without dishonest intention at the transaction’s inception, disclose cheating under Section 420 IPC.

Whether an unpaid contractual bill amounts to property entrusted for the purposes of Section 406 IPC, and whether Sections 406 and 420 IPC can apply to the same undifferentiated facts.

Whether Section 202(1) CrPC requires an inquiry or investigation before process is issued against an accused residing beyond the Magistrate’s territorial jurisdiction, notwithstanding the presence of local co-accused.

Whether the availability of a discharge remedy bars the High Court from quashing proceedings under Section 482 CrPC.

Section 415 IPC requires deception and fraudulent or dishonest inducement, with dishonest intention existing at the inception of the transaction; a subsequent contractual breach alone does not constitute cheating.

Section 405 IPC requires entrustment of property or dominion over it, followed by dishonest misappropriation or conversion; an unpaid contractual debt is not, by itself, entrusted property.

The court treated cheating and criminal breach of trust as conceptually distinct and unable to rest on the same undifferentiated allegations.

Section 202(1) CrPC requires the Magistrate to postpone process and conduct an inquiry or direct an investigation where the accused resides beyond the Magistrate’s territorial jurisdiction.

Section 482 CrPC permits quashing to prevent abuse of process even where a discharge remedy is available.

The court relied, among other authorities, on Binod Kumar v. State of Bihar, VESA Holdings Pvt. Ltd. v. State of Kerala, Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, National Bank of Oman v. Barakara Abdul Aziz, Vijay Dhanuka v. Najima Mamtaj, and Pepsi Foods Ltd. v. Special Judicial Magistrate.

The complaint concerned disputed payment for civil work performed under a commercial contract, against a background of periodic payments and a negotiated settlement. It did not allege facts showing that the petitioners had a dishonest intention when the contract was made; nor did it identify property entrusted by the complainant to the petitioners and subsequently misappropriated. The allegations therefore did not disclose the essential ingredients of Sections 420 or 406 IPC.

The Magistrate issued process against the Kolkata-resident petitioners without first conducting the inquiry or investigation required by Section 202(1) CrPC; the presence of local co-accused did not remove that requirement.

The court also held that the availability of discharge did not prevent quashing where the complaint failed to disclose the offences at the threshold. It further noted that the contracting company had not been arraigned and that the directors’ prosecution was unsustainable on that basis in the circumstances of the case.

The revisional application was allowed, and the complaint proceedings under Sections 406 and 420 IPC, including the order dated 22 December 2021 issuing process, were quashed insofar as they concerned the petitioners.